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Collapse of a dream

7 December 1974

COLLAPSE OF A DREAMGovernment to take big holding in British Leyland as price of mounting cash rescue operationBy Michael Hatfield Political Staff

The Government is to take an important shareholding in British Leyland, the country's biggest exporter and biggest car manufacturer. Although the company's difficulties were well known, the timing of the announcement in the Commons yesterday by Mr Wedgwood Benn, Secretary of State for Industry, took MPs by surprise.

Not many were present when he made his statement. He would not indicate the proposed size of the state share in the company, but there was a widespread suspicion among politicians that the Government has in mind a majority shareholding. Mr Benn said in his statement "In response to the company's request for support for their investment programme, the Government also intend to introduce longer term arrangements, including a measure of public ownership."

When questioned, he said that until the team led by Sir Don Ryder, which is to inquire into the state of the company, revealed how much support was needed, the extent of public participation would not become apparent. In reply to another question, he said: "If the Government are required to put substantial sums of money into British Leyland in view of its importance to our national economy, it is quite right that the taxpayer in making that contribution should get with it an appropriate measure of public control and accountability.

"I do not see why the taxpayer should be put at any special advantage vis-a-vis any other investor, given that other investors when they put their money in automatically expect they will get an appropriate measure of control."

"Discussions have been taking place with the company regarding both its short term requirements for working capital and its long-term investment programme." Because of the company's position in the economy as a leading exporter and of its importance to employment, both directly and through the many firms that are dependent on it, the Government are informing the company's bankers that the approval of Parliament will be sought for a guarantee of the working capital required over and above existing facilities. I am satisfied that this will enable the company's requirements to continue to be met without interruption."

In response to the company's request for support for their investment programme, the Government also intend to introduce longer term arrangements, including a measure of public ownership. In order to help the Government in framing a scheme for this purpose, it is proposed to appoint a high-level team, led by Sir Don Ryder, including members drawn from the IDAB (the Department of Industry's industrial advisory board), to advise on the company's situation and prospects, and the team will consult the company and the trade unions "A further statement about the arrangements for the inquiry team will be made shortly and I will also put before the House the proposed guarantee to the banks for their approval."

Replying to Mr Heseltine, Opposition spokesman on industry, Mr Benn said that on the amount of the guarantee it would be sensible for MPs to await the study to be undertaken by the inquiry team.